Northrop Grumman NOC +0% (NOC), a holding in our model growth portfolio, has completed more than two quarters since its June 2018 acquisition of Orbital ATK OA +0%, which was renamed Northrop Grumman Innovation Systems (IS) once it began operating as a subsidiary of the mother company.
Orbital has added about 15% to Northrop’s revenue base. So far there have been no hiccups, with Orbital being nearly fully integrated into the whole. Margins have remained at pre-acquisition levels. That’s a bit disappointing but not unexpected in that the company’s business lines, while largely dedicated to defense, do not directly overlap with those of other Northrop divisions.
Specifically, IS is dedicated to small space systems and satellites (for both defense and commercial) while prior to IS, Northrop concentrated on much larger space systems. Other areas promise rising margins over the longer term because the Defense Department has specified them as necessary, including missile products, ammunition, electronics, aerospace and propulsion structures, and launch vehicles. more